Zhao also agreed to step down as chief executive of Binance. He will be replaced by Richard Teng, the company’s global head of regional markets.
The company pleaded guilty to violating the Bank Secrecy Act, which requires financial institutions to verify the identities of their customers and report suspicious activity that might be a sign of money laundering, tax evasion, or other crimes. It also pleaded guilty to failing to register as a money-transfer business and violating sanctions law.
The deal is the culmination of a three-year investigation by the Justice Department. It comes months after regulators had accused Binance of operating as an unregistered securities exchange.
Zhao had been one of the most potent forces in cryptocurrency, sparring with regulators for years. He has an estimated net worth of $23.5 billion, according to the Bloomberg Billionaires Index, mainly from his vast crypto holdings and equity in Binance. He also was an original investor in FTX, the beleaguered crypto exchange founded by Sam Bankman-Fried, who was convicted of seven counts of fraud and money laundering earlier this month in New York.
“Today, I stepped down as CEO of Binance,” Zhao said in a lengthy post on X, formerly Twitter, that did not mention his guilty plea. “I made mistakes, and I must take responsibility. This is best for our community, for Binance, and myself.”
The federal probe into Binance comes at a time of deep uncertainty for the crypto industry amid concerns about the freewheeling, largely unregulated online marketplaces where digital assets are bought and sold. Tuesday’s pleas will expedite the demise of the exchange’s American arm, BinanceUS, which restricted its customers from trading U.S. dollars on its platform in June.
Prosecutors said Binance did not implement anti-money-laundering measures, allowing the firm to become a clearinghouse for all illicit financial transactions. From 2018 to 2022, they said, nearly $900 million in financial transactions that violated sanctions against Iran were made, the court papers charge.
The filings paint Zhao as the architect of a system that intentionally shielded American customers from the supervision of U.S. regulators for the firm’s financial gain. Binance would refer to U.S. customers as “VIPs” handled by a separate manager, court filings allege. Zhao called its revenue from U.S. users a “grey zone.”
“Better to ask for forgiveness than permission,” Zhao wrote.
In its announcement, the Treasury Department accused Binance of allowing Hamas’s Izzedine al-Qassam Brigades, Palestinian Islamic Jihad, al-Qaeda, and the Islamic State “to transact freely, supporting activities from child sexual abuse to illegal narcotics to terrorism.”
The agency will monitor Binance’s financial records for five years under the threat of a $150 million penalty. Tuesday’s settlement will also ensure Binance’s “complete exit from the United States,” according to a statement.
Treasury Secretary Janet L. Yellen said in a statement that the company “allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.”
In June, the Securities and Exchange Commission came after Binance and Coinbase, another crypto exchange, asking Binance to freeze all assets on its U.S. platform and accusing Coinbase of acting as a securities exchange, broker, and clearing agency.
According to company statements, around a dozen of Binance’s senior directors and executives left the company in the following months.
“Binance became the world’s largest cryptocurrency exchange partly because of the crimes it committed — now it is paying one of the largest corporate penalties in U.S. history,” said Attorney General Merrick Garland. He noted that in the past month, the Justice Department has won a guilty plea or a conviction of the leaders of two of the world’s largest cryptocurrency exchanges — Zhao and Bankman-Fried.
Authorities said Binance earned a 20 percent reduction in its sentencing fine for cooperating with investigators. Still, they noted that it received only partial
Binance, the world’s largest cryptocurrency exchange, and its founder Changpeng Zhao have pleaded guilty to violating criminal anti-money-laundering guidelines. The guilty plea is a significant blow to the company, which has been ordered to pay a $4.3 billion fine, one of the largest ever levied against a corporation. The plea agreement marks the second time this month that a major player in the crypto industry has been brought down by federal charges.
Zhao, who appeared in U.S. District Court in Seattle, faces up to 18 months in prison for violating the Bank Secrecy Act, according to sentencing guidelines. Court filings show that he will also be fined $50 million and is barred from working with the exchange for three years. In addition, Zhao agreed to step down as CEO of Binance, to be replaced by Richard Teng, the company’s global head of regional markets.
The company pleaded guilty to violating the Bank Secrecy Act, which requires financial institutions to verify the identities of their customers and report suspicious activity that might be a sign of money laundering, tax evasion, or other crimes. It also pleaded guilty to failing to register as a money-transfer business and violating sanctions law.
The plea agreement is the culmination of a three-year investigation by the Justice Department and comes months after regulators had accused Binance of operating as an unregistered securities exchange. Zhao had been one of the most powerful figures in cryptocurrency, but he has now been brought down by the charges.
The federal probe into Binance comes at a time of deep uncertainty for the crypto industry amid concerns about the largely unregulated online marketplaces where digital assets are bought and sold. Tuesday’s guilty pleas will expedite the demise of the exchange’s American arm, BinanceUS, which restricted its customers from trading U.S. dollars on its platform in June.
Prosecutors accused Binance of not implementing anti-money-laundering measures, allowing the firm to become a clearinghouse for all illicit financial transactions. From 2018 to 2022, nearly $900 million in financial transactions that violated sanctions against Iran were made, according to court papers.
The filings paint Zhao as the architect of a system that intentionally shielded American customers from the supervision of U.S. regulators for the firm’s financial gain. Binance would refer to U.S. customers as “VIPs” handled by a separate manager, court filings allege. Zhao called its revenue from U.S. users a “grey zone.”
In its announcement, the Treasury Department accused Binance of allowing Hamas’s Izzedine al-Qassam Brigades, Palestinian Islamic Jihad, al-Qaeda, and the Islamic State “to transact freely, supporting activities from child sexual abuse to illegal narcotics to terrorism.” The agency will monitor Binance’s financial records for five years under the threat of a $150 million penalty.
Tuesday’s settlement will also ensure Binance’s “complete exit from the United States,” according to a statement. Treasury Secretary Janet L. Yellen said in a statement that the company “allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.”
In June, the Securities and Exchange Commission came after Binance and Coinbase, another crypto exchange, asking Binance to freeze all assets on its U.S. platform and accusing Coinbase of acting as a securities exchange, broker, and clearing agency. According to company statements, around a dozen of Binance’s senior directors and executives left the company in the following months.
“Binance became the world’s largest cryptocurrency exchange partly because of the crimes it committed — now it is paying one of the largest corporate penalties in U.S. history,” said Attorney General Merrick Garland. He noted that in the past month, the Justice Department has won a guilty plea or a conviction of the leaders of two of the world’s largest cryptocurrency exchanges — Zhao and Bankman-Fried.
Authorities said Binance earned a 20 percent reduction in its sentencing fine for cooperating with investigators. Nevertheless, they noted that it received only partial credit for cooperation because it delayed producing key evidence, including recordings of meetings in which executives discussed U.S. legal requirements.
Tuesday’s announcements cap a tumultuous few months for the broader crypto industry, following the high-profile fraud trial of Bankman-Fried and a regulatory push by Sen. Elizabeth Warren (D-MA).
credit for cooperation because it delayed producing key evidence, including recordings of meetings in which executives discussed U.S. legal requirements.
Tuesday’s announcements cap a tumultuous few months for the broader crypto industry, following the high-profile fraud trial of Bankman-Fried and a regulatory push by Sen. Elizabeth Warren (D-Mass.) and other policymakers to crack down on cryptocurrency being used to finance terrorism.
With the multibillion-dollar fine and legal action, the government is delivering a message well beyond Binance to the broader cryptocurrency sector, said Kit Addleman, partner at Haynes and Boone and former director of the SEC’s Atlanta-region office.
“The government’s message is about compliance with federal laws on financial sanctions, and the government wants that to apply in the cryptocurrency world just as it does with fiat currency,” Addleman said.
The plea deal is another victory for federal regulators to rid bad crypto actors from the United States, said Carl Tobias, a law professor at the University of Richmond.
“Especially after what they did in the Southern District of New York with the other big crypto story this year,” he said, referring to Bankman-Fried’s conviction.
On Nov. 2, Bankman-Fried was convicted of fraud, conspiracy, and money laundering for orchestrating one of the largest financial frauds in history. Prosecutors say his victims suffered nearly $10 billion in losses after FTX misappropriated customer funds to spend lavishly on luxury real estate, investments, and “dark money” political donations.
He faces the prospect of decades in prison when he is sentenced in late March.
In his statement posted on X, Zhao said he doesn’t see himself becoming CEO of a new company in the three years before he’s allowed to return to Binance. But he hasn’t closed the door on other opportunities.
“Should there be listeners, I may be open to being a coach/mentor to a small number of entrepreneurs,” he said.